All business owners want to believe that their marketing is increasing their sales, but how do you know which marketing efforts are actually working? Unfortunately, most business owners don’t know how to track whether their marketing is working, or they don’t know if their efforts are being directed to the right place to positively affect profits.
Consider the term ROI, which means Return on Investment. This term has two meanings, which, at times can be a bit confusing. The first definition refers to the amount of return an investor can expect or has received for each dollar invested in a company. This is what most accountants are referring to when they use the term ROI. However, marketing people often use the term ROI to indicate how much profit or return is received for each dollar invested in marketing. In accounting terms, this is known as a KPI or Key Performance Indicator. These KPIs affect everything in the business from purchasing decisions to staffing and payroll issues to merchandising and marketing.
The trick to setting up useful KPIs is to determine what you should track. Setting up KPIs to track the cost of goods and how that affects profits is pretty straightforward; the information can be pulled directly from the financial statements. However, setting up KPIs for marketing activities can be time-consuming. Once they’re set up, though, you can glean tons of information from them.
There are several ways to set these up. I will go over just a few to give you an idea of how you can set up marketing KPIs for your own business. If you need more help or direction, please give me a call. If you need help setting up a marketing campaign, I recommend that you contact Jared Finkenbinder at http://design328.com—we often work together to set up budgets and tracking for our clients’ marketing programs.
Let’s start with a basic social media campaign. These are easy to track because online platforms such as Google AdWords or Facebook Insights give you a ton of information on who and how your audience is interacting with your advertisements. Tracking comes in the form of mouse clicks—normally part of the analytics behind your ad. The problem is that this normally just tracks number of clicks in relation to the amount of money you spend to get that click. The key is to figure out how each click translates to a sale. If your only income is from one ad, then figuring this is easy, but if your income is from multiple sources, or if you have more than one ad running at a time, it gets trickier. Using a unique code for each ad, you can actually determine the origin of each sale. I have also seen this done with unique phone numbers or even by creating a separate website landing page for each ad.
Similar tracking methods can be used for direct mail, print, or even radio and TV advertising. The problem is that most business owners (and even a lot of marketers) don’t follow through by using the provided information to analyze the effectiveness of the ad. This is quite simple once the means of capturing the information is set up.
Once you know that a sale is generated from a particular advertisement, you can calculate a percentage of increase in sales from that campaign. The biggest benefit to this is that it allows you to narrow down which ads have the most impact, and style the next campaign using that information. You can then analyze the results again and keep going until you have the best sales for each advertising dollar.
Now let’s turn our attention to marketing ventures that are harder to track: trade shows and networking events. Both have the problem of amount of time involved and, sometimes, the cost of personnel to staff the booth or attend the event. When tracking expenses and hours spent on an event, you also must include the activities leading up to that event—such as the time and expenses to design the booth, get promotional materials together, and even travel to and from the event. You also need to consider other activities the event takes your attention away from. If your entire team attends a trade show to staff a booth, who will run the store back home? Will you need to add staff and overtime hours to get the product out the door while you attend the trade show? Will the event increase leads and opportunities to advance your business and drive more sales? All of these must be weighed against training and education opportunities your staff might have while attending the event.
This becomes even trickier when you consider whether your brand or reputation are affected. If you send someone to a trade show or networking event just because they are on your sales team, but that person cannot effectively detail all the benefits of your product or service, you can actually decrease sales by hurting your brand! You can also harm your reputation by sending someone who knows and understands the product or service but has a tough time relating to people. You don’t want to send a product engineer to a social event if he is uncomfortable in such a situation, but that engineer may be the perfect person to send to a medical convention with a room full of scientists.
Fortunately, there is a way to determine the most effective salespeople. When determining the effectiveness of a salesperson, you can keep track of the number of calls made per day, how many of those calls resulted in a sale, the cost to employ that person, and how much income resulted from those sales. You can even get more detailed by including the number of calls it took to make a sale.
You can apply similar techniques to trade shows and networking events by figuring the number of events attended, the number of hours those events took, the cost of attending the events, and the sales that are directly associated with the contacts made at the events. For multiple events or trade shows worked by a team, you can use some of the same techniques used for social media tracking by giving each team member or each event a unique identifier—so you know who first orchestrated each sale.
As with any finance activity, the key is in the setup. Once you know what you want to track and how you will track it, follow through by analyzing the information collected. You’ll be able to determine whether an advertisement, trade show, or networking event is worth doing again. You can also tweak the process to find ways to improve the content of your advertisement, position of your booth, or determine which staff attend which event. Remember, this is as much about intuition and perception as it is about numbers.
I have seen trade show booths that didn’t work well one year but, by applying what was learned from the event, the next year’s booth drew more attention and was very lucrative. I personally attend networking events and trade shows for the training opportunities—with obtaining new clients a secondary concern. The problem with not tracking the KPIs or the ROI is that you won’t know which events did great, which need to be tweaked to be profitable, and which to drop completely.
We will be doing a free webinar on January 3, 2017, on Preparing for a Successful 2018. Sign up for this or any of our other free Solid Rock Boot Camp classes on Facebook atwww.facebook.com/pg/Alpha.Omega.Accounting.LLC/events or email us for registration information at firstname.lastname@example.org.